As you’ve probably heard, Wisconsin recently passed a prize-linked savings (PLS) bill into law. The new law lets Wisconsin credit unions and other financial institutions offer PLS programs, where consumers earn entries to prize drawings by making deposits into qualified savings accounts.
Members who participate in PLS still can earn interest on their savings, but the chance to win gives them an additional incentive to save. This supports credit unions’ mission to serve financially vulnerable members who have the hardest time saving. Instead of spending money on lottery tickets, members can deposit and save those funds for themselves and still have a chance to hit the jackpot!
Wisconsin joins a growing list of states that have adopted PLS legislation. Since 2009, over $175 million has been saved by 75,000 credit union members nationwide. More than 80% of the people participating nationwide were financially vulnerable and accumulated savings of over $2,400 on average.
Requirements for a PLS program
The new credit union PLS law (found in §186.114 of the Wisconsin Statutes) says that Wisconsin credit unions can conduct a PLS promotion or participate with a trade association (like The League or the W.C.U.L. Services Corp.) in conducting one.
Members are eligible to win prizes by depositing funds into a “qualifying account” with the credit union. To be a “qualifying account,” several conditions must be met:
- Depositors cannot be required to pay any fee or give “other consideration” to enter;
- All fees charged by the credit union on a PLS account must be comparable with fees charged on other accounts;
- Each entry in the PLS promotion must have an equal chance of winning; and
- Participants cannot be required to be present at a prize drawing to win.
The new law goes on to explain that credit unions can require members to deposit specified amounts into a PLS “qualifying account” for a specified amounts of time. Such account restrictions do not count as “consideration,” so long as the interest rate on the PLS account is not reduced (as compared to other accounts).
The new law also amends Wisconsin statutes on raffles, lotteries and betting: A PLS promotion will not violate those laws if it meets the statutory requirements listed earlier. This protection applies to state-charted credit unions and FCUs.
League working to roll out statewide PLS program
The League and League Services Corp. boards have given their approval to develop a state-wide, multi-credit-union PLS program branded specifically for Wisconsin credit unions. The program parameters will be set with the help of a credit union advisory group; and back office support will be provided through a partnership with the Minnesota Credit Union Network. We plan to launch the program at The League’s Annual Convention this May in Green Bay.
If your credit union is thinking of setting up its own PLS program, The League strongly suggests holding off on those plans, since you would likely be much better served by participating in the Wisconsin program with other credit unions.
Details remain to be worked out, but it’s likely that The League PLS program will require members to deposit some relatively modest amount(s) each month to be eligible for drawings. Members will have to agree to keep the funds on deposit (subject to early withdrawal penalties), but they will be able to make a penalty-free withdrawal or roll over the funds to a share certificate after a year. The program will feature statewide drawings, but participating credit unions will also have the option to promote additional drawings just for their own members.
As we work through all of the details in establishing a PLS program for Wisconsin credit unions, we’ll look to draft a new ii Release explaining the various compliance issues involved.
Please watch for further updates and announcements from The League.